The Required Return on a Bond Is Equal to

question 6

Multiple Choice

The required return on a bond is equal to

• A) the real rate of return plus a risk premium plus an expected inflation premium.
• B) the real rate of return plus the coupon rate plus an inflation rate.
• C) the risk-free rate plus a risk premium plus an expected inflation premium.
• D) the real rate plus a risk premium.

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Definitions:

Net Income (Loss)

The total profit or loss a company generates in a specific period after all expenses, taxes, and costs have been deducted from total revenue.

Fixed Expenses

Costs that do not change with the level of production or sales activities within a certain range or period.

Variable Expenses

Costs that change in proportion to the level of activity within a business.

Contribution Margin

The amount by which the sales revenue of a product exceeds its variable costs, indicating how much contributes towards covering fixed costs and generating profit.